The article emphasizes the significant role of Global Liquidity, particularly the Global M2 money supply, in influencing Bitcoin's price movements. While traditionally, liquidity expansion leads to rising asset prices, there are emerging inconsistencies in Bitcoin's correlation with Global M2, particularly during its latest cycles. By focusing on the year-on-year change in Global M2 instead of its absolute values, traders can gain better insights into Bitcoin’s performance. Historical data indicates that rapid liquidity expansions align with Bitcoin's bull runs, while contractions lead to declines in asset values.
Rather than simply tracking the absolute value of Global M2, analyzing its year-on-year rate of change offers clearer insights into Bitcoin's performance, revealing stronger correlations.
With increasing discussions on platforms like Twitter (X) and analysts dissecting liquidity charts, understanding the relationship between Global Liquidity and Bitcoin is crucial for traders.
Historically, Bitcoin’s price has followed the Global M2’s expansion, rising during liquidity increases, but recent cycles show inconsistencies that necessitate a nuanced understanding.
When Global M2 contracts, risk assets typically decline in value due to tighter liquidity conditions, emphasizing the importance of monitoring this metric for Bitcoin trading.
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